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Credit inquiries fell to historic low in Q4, NY Fed says

Brady Porche
Managing Editor
Personal finance journalist with an eye for industry news

NY Fed: Credit inquiries fell to historic low in Q4

Consumer demand for new credit fell to a historic low in the fourth quarter of 2018, according to new data from the Federal Reserve of New York.

The New York Fed’s “Quarterly Report on Household Debt and Credit” – which measures home, student and auto loans as well as credit card debt – showed credit inquiries in the past six months fell to their lowest level since the Fed began tracking the data. Additionally, account closings rose to their highest level since 2010.

CreditCards.com industry analyst Ted Rossman said credit inquiries likely fell due to rising interest rates, less generous credit card rewards and a more cautious approach to lending by some companies, such as Capital One and Discover.

The data also show the percentage of credit card accounts that went into serious delinquency (90 days past due) in the fourth quarter ticked upward from 4.80 percent to 4.99 percent, quarter-over-quarter.

“I’m not alarmed because the fundamentals remain strong,” Rossman said. “Unemployment remains very low, credit delinquencies are below historical norms, consumer confidence is above the historical trend and wage growth is up.”

Consumers’ appetite for borrowing appears to be waning just as credit availability is tightening. A December report by the New York Fed showed rejection rates for credit card applications and credit limit increases rose year-over-year in October 2018. And more borrowers reported their lenders had closed their accounts in the past year.

See related: Consumers with best credit boosted their card spending in Q3, says ABA

However, Rossman believes credit applications will rebound later this year.

“UltraFICO and Experian Boost are examples of how the lending industry wants to expand,” he said.

Rising interest rates’ impact on consumer credit

Meanwhile, monthly Fed data on consumer credit – particularly revolving debt – showed slower growth in 2018 than in the previous year.

Experts say consumers may have been less active in using credit in 2018 due to rising interest rates.

The Fed increased its federal funds rate by a quarter of a percentage point four times last year, triggering steep rises in credit card APRs and interest rates on loans.

See related: Guide to rising credit card interest rates

The New York Fed reported overall household debt increased by $32 billion to $13.54 trillion in the fourth quarter – the 18th consecutive quarter with an increase.

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Fed: Card balances rose by $1.7 billion in December

Credit card balances increased in December, according to the Federal Reserve.

Published: February 7, 2019

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Credit Card Rate Report Updated: July 17th, 2019
Business
15.61%
Airline
17.59%
Cash Back
17.68%
Reward
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Student
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